RAY GRABANSKI COLUMN: Wheat, corn struggle after USDA reports

Wheat Wheat began the week sharply lower consolidating and pressured by the USDA reports. But the real pressure came from a lack of fresh supportive news, which allowed wheat to follow the sharply bearish corn market. As a result, wheat finished ...


Wheat began the week sharply lower consolidating and pressured by the USDA reports. But the real pressure came from a lack of fresh supportive news, which allowed wheat to follow the sharply bearish corn market. As a result, wheat finished June 30 sharply lower.

USDA estimated all wheat acreage at 63.5 million acres compared with the March estimate of 63.8 million acres and last year's acreage of 60.43 million. Winter wheat acreage is estimated at 46.4 million compared with March's estimate of 46.84 million and last year's acreage of 44.99 million. Spring wheat acreage is estimated at 14.2 million compared with March's estimate of 14.33 million and last year's acreage of 13.3 million. The Quarterly Grain Stocks report also was negative to the wheat as it showed 306 million bushels in stocks compared with the overage trade guess of 275 million bushels.

The wheat market started off July 1 mixed with the Chicago Board of Trade slightly higher while the Kansas City Board of Trade and Minneapolis Grain Exchange started softer and remained softer throughout the session. CBOT tried to rally during the session, but the selling in the other wheat exchanges and corn market limited session gains. The market was supported by technical buying and from short covering as traders turned to be buyers after thinking that the losses during the past few sessions in the wheat have been larger than should be. Harvest progress also is lagging behind normal pace, and that has many traders concerned that disease pressure still could become a bigger issue than expected. Gains were kept in check by news that Egypt tendered for wheat from Russia, Ukraine and Canada with none coming from the U.S.

Wheat continued mixed July 2 with CBOT and KBOT moving higher on spillover from rallying corn and technical buying with MGEX still experiencing price pressure from bearish expectations for spring wheat. The wheat market was sharply higher on the CBOT and KBOT supported by short covering ahead of the holiday weekend and spillover from rallying CBOT corn. Additional support is coming from the forecast for rain in the winter wheat regions, which is expected to delay harvest further and possibly decrease the quality of the winter wheat crop. With lower closes June 30 and July 1, it looks as if selling interest has dried up, though trading was lighter because of the holiday. The exception to the bullish streak July 3 was MGEX, which continues to experience pressure. Expectations that the spring wheat crop will be bearish because of improved crop quality and a large crop in general is limiting the possibility of any gains on the MGEX.


USDA's export inspections report showed last week's shipments at 15 million bushels compared with 18.3 million bushels last week and 25.4 million for last year at this time. This brings the year-to-date shipments pace for wheat to 65.7 million bushels compared with 68.3 million bushels for last year at this time.


Corn closed a limit down June 30 because of surprisingly large acreage numbers from the USDA (2 million acres more than the average trade guess). The U.S. planted 87.3 million acres of corn, 1.3 million above the March intentions and 2 million above trader expectations. That pressured corn throughout the day, especially given that stocks were larger than expectations (4.028 billion vs. 3.894 billion average traders estimate). After June 30's close, corn crop conditions were released showing the crop improved another 2 percent.

The corn market started the July 1 session off sharply lower but recovered late in the session to finish the session with only small losses. The biggest issue causing the pressure in the corn was again the June 30 USDA reports. Corn was able to recover late in the session as the strength from the sharply higher soybean complex combined with the higher Chicago wheat exchange. Weather concerns also jumped into to help the corn recover. Weather forecasts for the weekend are calling for rain to move back into the southern regions of the Corn Belt and the long-term forecasts are calling for a high-pressure ridge to set up over a majority of the Corn Belt. If this did come to reality, it would be a t a time when the crop would be in the beginning stages of pollinating and major damage cold result.

The corn market finished the day July 2 at limit up after losses earlier in the week. The major rally was a result of technical strength, weather concerns and unwinding spreads. Corn started the session higher from the overnight. The long liquidation experienced earlier in the week lost steam and opened the market back up with strong commercial buying to add to the markets upward movement. Strong technical support and the unwinding of soy-corn spreads were the catalysts for the market's surge. Outside markets and weather conditions also added to corn's upward momentum. Weather forecasts call for extremely hot weather in the coming week, leading to concerns about crop damage. Weather concerns have become an important theme for market direction because of already tighter than preferred supplies.

On the July 3 open, the market moved lower consolidating ahead of the holiday weekend. But again, buying on breaks was the theme and the corn was able to recover to be steady at the time of this writing.


Soybeans closed June 30 with strong gains in spite of acreage being up slightly from where traders anticipated with 74.5 million acres versus 74.2 million expected, and 63.6 million last year. Stocks were larger than expected at 676 million bushels versus 663 expected, so there wasn't any positive news in either report. But soybeans rallied anyway as traders also looked at the special report on harvested acres which showed a larger abandonment rate than normal. After the close, USDA weekly crop conditions showed soybeans up 1 percent good to excellent to 58 percent.


Soybeans started off higher July 1, but slipped slightly as selling pressure from the weaker corn and wheat market pressured the soybeans complex. But the soybeans were not willing to go quietly. A round of fund buying stepped in and pushed the soybeans to double-digit gains by midsession. This is when the buy stops were triggered and the funds turned to be aggressive buyers. By the close, the soybean complex had rallied and was posting 35-cent gains. Concerns that the last 5 percent of the soybeans will not get planted or that they will get planted in less-than-ideal conditions helped to support the soybean complex. Also, there are a lot of double crop soybeans that are not getting planted. Wheat producers in the delta and southern regions of the Corn Belt are experiencing problems harvesting wheat and that is delaying the opportunity for the double crop soybeans to get planted. This could result in a lower planted acreage estimate for soybeans as there were a lot of producers in this region that increased their wheat acres just on the thought of double cropping soybeans.

July 2 brought a mixed to lower market that later turned bullish on technical buying and weather concerns. The soybean complex started the session off lower on consolidation ahead of the holiday weekend, despite setting new record highs in the overnight session. That resulted in the market hitting sell stops and that helped to turn the soybeans lower. By midmorning, soybeans had turned mixed in two-sided trade. Pressure came from a favorable weather outlook and traders looking to take profits ahead of the weekend, though tight supplies lended enough support to limit losses. Later in the day, buying interest re-emerged pushing soybean contracts to new highs. Technical buying and a bullish fundamental outlook added to the upward momentum allowing soybeans to finish sharply higher for the day. With already tight old inventories, the market is very sensitive, and with concerns this sensitivity helped soybeans rally to the close.


Barley's planted acreage estimate for 2008 is estimated at 4.13 million acres compared with 4.02 million for last year. Harvested acreage is estimated at 3.64 million compared with 3.5 million for last year at this time. Of the largest barley-producing states, only Washington and Idaho reported lower planted acreage.


Durum's planted acreage for 2008 was estimated to be at 2.655 million acres compared with 2.140 million for last year. Harvested acreage is estimated at 2.583 million acres compared with 2.112 for last year. Last week's durum export shipments were estimated at 43,000 bushels. USDA estimated last week's durum export sales pace at 100,000 bushels. This brings the year-to-date export sales pace for durum to 9.2 million bushels compared with 8.8 million bushels for last year at this time.


USDA estimated canola planted acreage at 1.008 million acres compared with 1.183 million for last year. Harvested acreage for the 2008 crop was estimated at 979,000 compared with 1.163 million for last year.



All sunflower planted acreage is estimated at 2.164 million acres compared with 2.068 million acres last year. Harvested acreage is estimated at 2.063 million acres compared with 2.01 million last year. Oil sunflower planted acreage is estimated at 1.85 million compared with 1.764 million for last year. Confection sunflower planted acreage is estimated at 79,000 acres compared with 66,000 acres last year.

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